Relatives inheriting estates worth more than £300,000 from May this year are going to be hit with huge increases in court fees, as the government looks to target them as a way to reduce its Budget deficit.

Probate fees of up to £20,000

Despite hundreds of negative responses to last year’s consultation on the fee increases, the government is ignoring all protests and proceeding with the rise anyway, meaning millions face having to pay extra probate charges of up to £20,000 instead of the current fixed fee of £215 set by the Ministry of Justice.

Top 40 accountants and probate specialists Bishop Fleming branded the charges as a new inheritance tax in all but name, as the “astronomical” increase is expected to raise an additional £250m for the Treasury.

According to the government’s own figures, the current flat fee already adequately covers the administrative costs for the courts in processing grants of probate – giving executors the right to distribute the proceeds of someone’s will. The current fee does not change whether the value of the estate is worth £5,000 or £5m.

Slab-based stealth tax

The new system would impose a slab-based tax starting at £300 for estates worth between £50,000 and £300,000, but an estate worth £300,001 would pay £1,000, that is £785 more than now for an extra £1. An estate valued at £2m will pay £12,000, but an estate worth £2,000,001 will pay £20,000 – an extra £8,000 for just £1 more.

Value of estate (before IHT)Proposed fee
Up to £50,000£0
£50,001 - £300,000£300
£300,001 - £500,000£1,000
£500,001 - £1m£4,000
£1,000,001 - £1,600,000£8,000
£1,600,001 - £2m£12,000
Above £2m£20,000

With figures from the Land Registry showing average house prices in the UK having soared to around £220,000 by the end of 2016, with many houses worth much more than this, thousands more estates look likely to be caught by the new charges as prices continue to rise.

Bishop Fleming Partner and Head of the firm’s Probate Team, Alison Oliver, explained: “Not only are the proposed increases morally wrong as they are a stealth tax on grieving relatives, but the fact that the government wants to impose a slab-based system of tax that has previously been recognised as unfair makes an already difficult situation for the bereaved even worse”.

Couples face a double whammy in that the new fees will have to be paid both on the first death and the second – up to £40,000.

Defending the proposed increase, the government has previously claimed that estates will benefit from an increased nil-rate inheritance tax band for homes inherited by descendants from April this year. But according to Ms Oliver, many estates will not benefit from this as they won’t have the right kind of asset, or the right kind of descendant.

Ms Oliver added: “This is a disguised inheritance tax and the government is being sneaky in introducing this as a simple fee for dealing with people’s estates. Not only that, but it expects these fees to be paid upfront, which may not always be possible where there are no funds, or it is difficult to access them. Having to borrow the money, as the government suggests, is an insult to bereaved families.”

Probate fees: planning ahead

There may be ways of reducing the impact of the increased probate fees where applications are made after April, but professional advice should be sought before taking any action.

It may also be the case that more stringent checks on asset valuations need to be made as a result of the above changes, particularly where estate values are close to a banding limit.

Contact a member of our Probate team for further advice and assistance.

Related link

Petition

Click here to sign the petition to reconsider the proposed significant and unreasonable increase in probate fees. Although this is not our campaign, we strongly support it.

 
 
 
 
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